HSBC looks to Lovells on SWIP security issue

Lovells has advised HSBC on a commercial mortgage-backed security (CMBS) that gives the issuer an unprecedented level of flexibility to change the underlying portfolio.

HSBC acted as lead manager and sole bookrunner on a hybrid CMBS for Scottish Widows Investment Partnership (SWIP).

UK Balanced Property Finance issued £170m of floating rate notes, due 2017, made up of £120m of primary notes and £50m of standby notes, which can be issued at a later date. The hybrid structure allows the issuer to substitute all of the underlying portfolio during the life of the note.

Lovells capital markets partner Tauhid Ijaz said: “It’s unprecedented to have this degree of flexibility in a CMBS transaction. The standby notes also give the fund potential access to more capital without incurring the costs of a tap issue.”

Ijaz believes this type of structure will help to develop the market further. “CMBS is a tool that can help companies liberate value in their portfolio,” he said. “This structure has a lot of interest from property funds as it gives greater flexibility and access to cheaper funding.”

The deal is the third time Lovells has advised HSBC on a CMBS transaction. It previously acted on a £230m hybrid CMBS issued by F&C (a subsidiary of Friends Provident) and a CMBS for LCP Proudreed. Dickson Minto advised SWIP.